NOTE: On April 30, 2015, the press release was corrected as follows: In the RATINGS RATIONALE section, the following paragraph was added before “Factors that would lead to an upgrade or downgrade of the ratings”: On March 3, 2015, we announced that the execution of a deed of undertaking by the counterparty had no negative impact on the ratings of the notes (the RAC announcement). The determination made in the RAC announcement was largely driven by the application of Moody’s swap linkage criteria using our Swap Linkage Tool. Subsequently, we determined that one of the inputs (namely the “note rating without linkage”) that we had used in the Swap Linkage Tool was not correct. The input to the Swap Linkage Tool has been corrected, and today’s rating actions reflect the correct application of the swap linkage criteria. Revised release follows:
London, 11 March 2015 -- Moody's Investors Service ("Moody's") has today confirmed the ratings
of 7 notes in RMAC 2005-NSP2 PLC, RMAC Securities No.
1 PLC Series 2006-NS1 and RMAC Securities No. 1 PLC Series
2006-NS2 following the execution on 3 March 2015 of deeds of undertaking
by The Royal Bank of Scotland plc ("RBS") relating to the
swap agreements.
At the same time, Moody's has upgraded the ratings of 2 notes
in RMAC Securities No. 1 PLC Series 2006-NS1 and that of
3 notes in RMAC Securities No. 1 PLC Series 2006-NS2 due
to remedial actions taken by RBS and sufficient credit enhancement.
The upgrade of the B1c notes' rating in RMAC Securities No.
1 PLC Series 2006-NS1 was prompted by the correction to an input
in the cash-flow model used by Moody's whilst reflecting
swap counterparty exposure to RBS.
Finally, Moody's has downgraded the rating of the M1a notes
in RMAC Securities No. 1 PLC Series 2006-NS1 due to the
linkage between the notes' rating and their exposure to RBS as cross-currency
swap counterparty not being sufficiently mitigated.
Today's rating actions conclude the review of the ratings in the transactions,
which Moody's placed on review for downgrade or direction uncertain in
relation to exposure to RBS (Baa1/P-2) as swap counterparty on
29 July 2014 (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_305002).
The rating actions also incorporate the operational risk cap of Aa2 placed
on the notes' ratings across all three transactions.
For a detailed list of affected ratings, see towards the end of
the press release before the regulatory disclosures section.
RATINGS RATIONALE
Today's rating confirmations of 7 notes in RMAC 2005-NSP2 PLC,
RMAC Securities No. 1 PLC Series 2006-NS1 and RMAC Securities
No. 1 PLC Series 2006-NS2 reflect the notes' exposure
to RBS (Baa1/P-2) as cross-currency swap counterparty as
well as the offsetting impact of the amendments made to the swap documentation,
which sufficiently mitigate the swap counterparty risk for those notes.
For each transaction Moody's has received executed deeds of undertaking
whereby (i) the swaps' transfer trigger was lowered to Baa1 from
A3 and (ii) following the breach of collateral trigger, RBS is required
to post collateral in favour of the issuers in accordance with enhanced
formulas as defined in our Approach to Assessing Swap Counterparties in
Structured Finance Cash Flow Transactions published in November 2013.
Today's upgrades of the M2a and M2c notes in RMAC Securities No.
1 PLC Series 2006-NS1 was prompted by the implementation by RBS
of the aforementioned remedial measures and reflect sufficient credit
enhancement available under these notes. On 29 July 2014 Moody's
placed these 2 notes on review direction uncertain because of the potential
rating volatility that would follow after the expiry of the trigger-breach,
with remedial measures leading to upgrade versus lack of action leading
to downgrade.
The upgrade of the B1a, B1c and M2c notes in RMAC Securities No.
1 PLC Series 2006-NS2 reflects the sufficient credit enhancement
available under the notes and takes into consideration these notes'
exposure to the credit quality of RBS acting as swap provider.
Additionally, the upgrade of the B1c notes in RMAC Securities No.
1 PLC Series 2006-NS1 was driven by the correction that Moody's
has made to the cash-flow model used as part of its analysis.
The model has been corrected by assuming a portfolio weighted average
margin over three-month Libor of 1.6% instead of
0.4%. The correction of the error resulted in an
increase in credit enhancement, which together with the incorporation
of the cross currency swap counterparty risk, prompted the upgrade
of the notes to Ba1(sf) from B3(sf).
Finally, Moody's has downgraded the M1a notes in RMAC Securities
No. 1 PLC Series 2006-NS1 because the remedial actions taken
by RBS together with the credit enhancement available under the notes
are not sufficient to mitigate the swap linkage between the ratings of
the notes and their exposure to RBS as cross-currency swap provider.
On March 3, 2015, we announced that the execution of a deed of undertaking by the counterparty had no negative impact on the ratings of the notes (the RAC announcement). The determination made in the RAC announcement was largely driven by the application of Moody’s swap linkage criteria using our Swap Linkage Tool. Subsequently, we determined that one of the inputs (namely the “note rating without linkage”) that we had used in the Swap Linkage Tool was not correct. The input to the Swap Linkage Tool has been corrected, and today’s rating actions reflect the correct application of the swap linkage criteria.
Factors that would lead to an upgrade or downgrade of the ratings:
Upward pressure on the ratings could result from (1) better-than-expected
performance of the underlying assets; (2) deleveraging in the capital
structure; (3) a decline in counterparty risk, in particular
in that associated with RBS; and (4) a decline in country risk.
Downward pressure on the ratings could result from (1) worse-than-expected
performance of the underlying collateral; (2) deterioration in the
notes available credit enhancement; (3) deterioration in the counterparties'
credit quality, in particular in that of RBS; and (4) a rise
in country risk.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in January 2015.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
LIST OF AFFECTED RATINGS
Issuer: RMAC 2005-NSP2 PLC
....GBP22M M1a Notes, Confirmed at Aa2
(sf); previously on Jul 29, 2014 Aa2 (sf) Placed Under Review
for Possible Downgrade
....EUR48M M1c Notes, Confirmed at Aa2
(sf); previously on Jul 29, 2014 Aa2 (sf) Placed Under Review
for Possible Downgrade
....GBP26M M2a Notes, Confirmed at A2
(sf); previously on Jul 29, 2014 A2 (sf) Placed Under Review
for Possible Downgrade
....EUR37M M2c Notes, Confirmed at A2
(sf); previously on Jul 29, 2014 A2 (sf) Placed Under Review
for Possible Downgrade
Issuer: RMAC SECURITIES No. 1 PLC Series 2006-NS1
....GBP30M M1a Notes, Downgraded to
Aa3 (sf); previously on Jul 29, 2014 Aa2 (sf) Placed Under
Review for Possible Downgrade
....EUR59M M1c Notes, Confirmed at A1
(sf); previously on Jul 29, 2014 A1 (sf) Placed Under Review
Direction Uncertain
....GBP23.25M M2a Notes, Upgraded
to A3 (sf); previously on Jul 29, 2014 Baa1 (sf) Placed Under
Review Direction Uncertain
....EUR20M M2c Notes, Upgraded to A3
(sf); previously on Jul 29, 2014 Baa1 (sf) Placed Under Review
Direction Uncertain
....EUR60.5M B1c Notes, Upgraded
to Ba1 (sf); previously on Mar 7, 2014 Affirmed B3 (sf)
Issuer: RMAC SECURITIES No. 1 PLC Series 2006-NS2
....GBP26M M1a Notes, Confirmed at A1
(sf); previously on Jul 29, 2014 A1 (sf) Placed Under Review
for Possible Downgrade
....EUR37.5M M1c Notes, Confirmed
at A1 (sf); previously on Jul 29, 2014 A1 (sf) Placed Under
Review for Possible Downgrade
....EUR35.6M M2c Notes, Upgraded
to Baa1 (sf); previously on Jul 29, 2014 Baa2 (sf) Placed Under
Review for Possible Downgrade
....GBP15M B1a Notes, Upgraded to Ba2
(sf); previously on Feb 18, 2009 Downgraded to B2 (sf)
....EUR13.8M B1c Notes, Upgraded
to Ba2 (sf); previously on Feb 18, 2009 Downgraded to B2 (sf)
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of these transactions
in the past six months.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Christophe Larpin
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Olga Gekht
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Emily Rombeau
Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's takes rating actions in RMAC 2005-NSP2 PLC, RMAC Securities No. 1 PLC Series 2006-NS1 and RMAC Securities No. 1 PLC Series 2006-NS2
